The impact of free-trade agreements on foreign-trade zones.(Foreign-Trade Zones)(Advertisement)

A foreign-trade zone is a secure area, deemed outside the Customs territory of the U.S., and is typically located in or near a port of entry. Generally, goods may be imported into a foreign-trade zone, stored, processed or manufactured, and then exported from the foreign-trade zone without the payment of duties and excise taxes. However, for shipments destined to certain countries subject to trade agreements, such as Canada and Mexico, this general rule may not be the case. Goods manufactured or processed in a foreign-trade zone may be subject to duty and excise taxes even though they are being exported.

Since a free-trade agreement is comprehensive, permitting duty-free entry for virtually all products, it may appear to eliminate the need for a foreign-trade zone, which is more narrowly focused. …